SuperSports Inc.reported pretax
financial income of $260,000 for the year 2016. Taxable income of SuperSports
is however different from its pretax financial income because of the items
given below.
- Depreciation deducted on the tax return is $40,000
greater than the depreciation charged on Income Statement. - Estimated Warranties Expenses charged to Income
Statement is $30,000 but Warranties expenses deductible on tax return are
$20,000 - $3,200 appear in the income statement of SuperSports as
Fines and penalties paid. - SuperSports received $ 6,000 interest from Tax Saving
Municipal Bonds.
Enacted Tax Rate for the year 2016
is 30% and for 2017 is 35%
Required: For the year 2016, SuperSports
Inc. requests you to:
- Identify items of permanent and temporary difference
from the information given - What items of temporary difference result in future
taxable amounts and what items will result in future deductible amounts - Compute Taxable Income
- Compute current income tax expense/Tax payable
- Compute deferred taxes ( Deferred Tax Liability and
Deferred Tax Asset) - Record journal entry for Income Tax Expense
- Show how deferred taxes will be reported in the Balance
Sheet.
Case
Study Part B
SuperSports provides you the
following pension data for the year 2016.
Item |
|
Service |
$248,000 |
Projected |
$340,000 |
Plan |
$360,000 |
Prior |
$250,000 |
Net |
$110,000 |
Actual |
$45,000 |
Interest |
10% |
Contributions |
$175,000 |
SuperSports requests you to:
- Compute pension expense for the year 2016
- Record 2016 journal entry for pension expense